TFPD_04: ICC Opinions are ICC Opinions are ICC Opinions

The next of the eight Trade Finance Paradigms is: ICC
Opinions are ICC Opinions are ICC Opinions

UCP 600 article 14(a) reads:

A nominated bank acting on its nomination, a confirming
bank, if any, and the issuing bank must examine a presentation to determine, on
the basis of the documents alone, whether or not the documents appear on their
face to constitute a complying presentation.

From the above it can be concluded that the documents
presented under an LC will be examined. This examination will be done on the
basis of the documents alone –and “on their face.” The result of the
examination is a “yes” or “no” to the question if the documents constitute a
“complying presentation.”

So the good question is what in fact a complying
presentation is.

UCP 600 defines a “complying presentation” as follows: a
presentation that is in accordance with the terms and conditions of the credit,
the applicable provisions of these rules and international standard banking
practice.

This definition offers a 3 level hierarchy:

1: “The terms and conditions of the credit”

First one is (on its face) easy. The provisions of the LC
must be complied with. This supersedes the rules and the practices.

Of course – in practice it is often very difficult to fully
understand the terms and conditions of the LC …. But that is another blog post
:-)

2: “The applicable provisions of these rules”

This means (in this case) the UCP 600. Also easy! Again
there may be provisions in the rules that are difficult to fully apply to a
specific LC … But that is also another blog post :-)

3: “International standard banking practice”

So here comes the (for the purpose of this blog post)
interesting one: International standard banking practice. This is not to be
confused with the ICC publication titled “ISBP - International Standard Banking
Practice for the Examination of Documents under Documentary Credits.”

So what is the difference between “international standard
banking practice” and “ISBP - International Standard Banking Practice?”

As such “international standard banking practice” is build
on the fact that the LC and the UCP 600 only articulate some of the processes
that banks do in the examination of the documents presented. Or saying it
another way: It is the practical application of the document examination. The
ISBP captures some of this – but as such “international standard banking
practice” is broader. It contains more!

So the next question is what more? That may be a number of
things – like court cases or DOCDEX cases. There is however one “instrument”
that above anything else carries the “international standard banking practice;”
namely the ICC Opinions.

In fact the ICC Opinions is the product of a really unique
service offered by the ICC Banking Commission. The ICC National Committees can
submit queries to the ICC Banking Commission asking for their interpretation of
a certain UCP 600 article (or for that matter URDG 758 article or URC 522
article) vis-à-vis a practical problem (as opposed to a hypnotically problem).
These interpretations – these answers are called “Opinions,” and they are
published in books and in DC-Pro.

A vast number of ICC Opinions exist – and they collectively
represent a major part of what is “international standard banking practice,”
and are in fact “fuel” for the ongoing revision of the ISBP. So the ICC
opinions are very important when trying to fully understand what it takes to
either 1) produce complying documents to be presented under an LC or 2) to
examine same.

There is however a
number of problems related to the ICC Opinions:

1: They only apply to the specific case

As such the role of the ICC Opinions is a “fuzzy.” On one
hand they are fully acknowledged as an important part of “international
standard banking practice,” on the other that are single answers to single
questions. The answers do not necessarily apply to other cases. There may be
other variables that would provide a different answer. There are also many
examples of Opinions being superseded by other Opinions. In such cases the
“old” one is not marked “superseded.”

In other words you may well be presented with an Opinion
that no longer applies – or only applies in very “narrow” circumstances.

2: There is no standard form

As a consequence of the above – I would expect – there is no
standard “form.” It is “free text” in letter format. Some are short and to the
point. Some are long showing (as an example) a lengthy dialogue between two
parties.

They are not catalogued or indexed. For example it would be
a huge task finding all “applicable” Opinions to a certain UCP 600 article.

This means that it may be extremely hard to find relevant
Opinions to document a case. I.e. it is hard to locate the relevant
“international standard banking practice” documented in ICC Opinions.

3: They are hard to get

Last – but not least – the ICC Opinions may not be easy to
get hold of. They are subject to Copyright. Circulated to the members of the
ICC Banking Commission (mainly bankers), and (Select^ed Opinions) are published
in (somewhat expensive books) – and finally they are available at the DC-Pro,
which can be accessed for EUR 2500 per year. So most likely the majority of
users are bankers.

The consequence of the above is that a major part of “international
standard banking practice” is really hard to access – and most likely
impossible if you do not work at a bank. So the people that would really
benefit from the ICC Opinions; namely the companies using LCs are effectively
cut off from getting their hand on them.

So what to do about that?

As far as I can see – lots can be done. For example the
should be presented in a fixed template showing (example) Topic(s), UCP 600
article(s), ISBP paragraph(s), related Opinion(s) and DOCDEX Opinion(s) – as
well as clear fields showing Query, Analysis and Conclusion. This would mean
that they can be inserted into a database allowing all kind of searches.

In a previous blog post (TFPD_02: ICC can only make money by
high priced publications and hard protected copyrights – part 2 of 2) I made
suggestions regarding access to trade finance information. In such a scenario
the above would fit perfectly. Looking up one article in the UCP 600 could
provide you a comprehensive overview of the relevant “international standard
banking practice.”

The above will require a lot of work – but there are so many
totally dedicated LC people out there – so I am sure it would be possible to
find a good and highly qualified handful to do the job. Especially if that
would give them possibility to carefully study the ICC Opinions of the ICC
Banking Commission.

In my view the ICC Opinions are pure gold. I am merely
asking they are treated that way.